By the Justice Department's account, Shu Jun Zhen of New York was a courier for a Chinese network that laundered over US$92 million. Zhen collected cash from drug traffickers in the US and paid it, under real and fake identities, into the bank accounts of shell companies. The deposits totaled about US$23 million. The courier admitted knowing that the funds included drug trafficking proceeds, and that knowledge is one of the three things every law below asks for. Cash deposits like these are placement, the first of three stages, and the money laundering methods change from stage to stage.
What counts as money laundering in law?
Money laundering, sometimes called money washing, needs three things: criminal property, an act done with it, and knowledge, or in some laws suspicion, of where it came from. Under the UK's Proceeds of Crime Act 2002 (POCA), property is criminal when it is the benefit of conduct that is an offense in any part of the UK. The act can be hiding or moving the property, arranging for another to hold it, or just acquiring, using or possessing it.
Knowledge does not have to be admitted, as Zhen's was. The FATF Recommendations ask countries to let intent and knowledge be "inferred from objective factual circumstances" (Interpretive Note to Recommendation 3, p. 38).
The crime that produced the money is the predicate offense. US law lists "specified unlawful activity" in 18 U.S.C. 1956, and Directive (EU) 2018/1673 names 23 categories of criminal activity, among them drug trafficking, cybercrime and, since 2024, the violation of EU sanctions.
Fraud and corruption are predicates under the US, UK and EU laws. Neither the FATF standard nor EU law requires a conviction for the predicate first.
Launderers come in two main types. Self launderers move their own proceeds, like a dealer who buys a car with the takings (illustrative); third party launderers, such as Zhen, handle money for others.
If nobody on your team can tell which crime produced the money, that alone is no reason to close an alert: US law asks for knowledge of some form, "though not necessarily which form", of felony, EU law needs no proof of "all the factual elements" of the source crime, and in the UK suspicion that money is criminal property is itself the test.
How do US, UK, EU and Indian laws define money laundering?
Table 1. The money laundering offense in four jurisdictions (texts as of October 2026).
| Law | Acts covered | Mental element | What the source crime must be |
|---|---|---|---|
| US: 18 U.S.C. 1956 and 1957 | A transaction in criminal proceeds to promote the crime, evade tax, conceal the money or dodge a reporting rule; under 1957, any transaction over US$10,000 in criminally derived property | Knowing the property is the proceeds "of some form of unlawful activity" | A "specified unlawful activity"; the launderer need only know it was some felony, "though not necessarily which form" (1956(c)(1)) |
| UK: POCA ss327 to 329 | Conceal, disguise, convert, transfer or remove; enter an arrangement; acquire, use or possess, unless paid for at adequate consideration | Knows or suspects (s340(3)) | Any offense in any part of the UK, or conduct abroad that would be one there; it is immaterial who carried it out (s340(2), (4)) |
| EU: Directive (EU) 2018/1673, Art 3, as amended by Directive (EU) 2024/1226 | Convert or transfer to conceal; conceal or disguise; acquire, possess or use | Knowing; states may add suspected or "ought to have known" (Art 3(2)) | Criminal activity, the 23 listed categories included; "all the factual elements" of it need not be established (Art 3(3)(b)) |
| India: PMLA 2002 s3 (in Hindi, धन शोधन निवारण अधिनियम) | Concealment, possession, acquisition or use, and projecting or claiming it as untainted; a "continuing activity" | Knowingly assists or is a party, or is actually involved | An offense in the Act's Schedule (proceeds of crime, s2(1)(u)) |
The key laws cover much the same acts and differ on the mind: knowledge in US and Indian law and in the EU baseline, suspicion as well in the UK. The UK and India reach anyone who uses or holds criminal property with no need to hide it, and US law does the same for transactions over US$10,000 through 1957. Maximum prison terms are 20 years in the US (1956), 14 years in the UK on indictment (s334) and at least four years under the EU directive (Art 5(2)); India sets three to seven years (s4), and ten where the proceeds come from the narcotics offenses in its Schedule.
No amount makes conduct laundering. The FATF asks for an offense that covers property "regardless of its value". Amounts in these laws set a separate offense, as in 1957, or a filing duty. Under FinCEN's Bank Secrecy Act rules, US banks report cash transactions over US$10,000 (31 CFR 1010.311) and file suspicious activity reports on suspicious transactions that involve or aggregate at least US$5,000 (31 CFR 1020.320).
What changed in 2026.
- June: the FATF updated the text of its Recommendations.
- 30 June: most of the UK's S.I. 2026/621 came into force, amending the Money Laundering Regulations 2017, which set firms' duties; the POCA offense sections did not change.
- AMLA: AMLA, the EU's AML authority, began operating in summer 2025. During 2027 it chooses the 40 obliged entities it will oversee itself, and that direct supervision begins during 2028. The EU AML Regulation applies from 10 July 2027.
- 21 October: the courier in the opening was sentenced in the Western District of North Carolina.
What are the three stages of money laundering?
The three stage model is a teaching description of how laundering works. No statute above requires all three stages, and one act can be enough for a charge.
Table 2. The three stages of money laundering.
| Stage | What happens to the money | What it leaves in the records | Who may see it first |
|---|---|---|---|
| Stage one: placement | Cash or other proceeds enter the financial system | Deposits, cash purchases, new accounts | Bank branches, money services businesses, cash dealers |
| Stage two: layering | Funds move between accounts, companies, countries, crypto wallets or assets | Transfers with no business reason, round trips, new counterparties | The bank's monitoring team, correspondent banks |
| Stage three: integration | The money comes back looking earned | Property, business stakes, loans repaid, income out of line with the customer | Lenders, property professionals, tax authorities |
The main placement techniques have names of their own. Cash split into amounts under a reporting line is structuring, and spread across many depositors it is smurfing. Layering runs through accounts and companies set up for the purpose, including front companies that mix the money into real sales. Integration is the flat in a company's name, or the loan repaid.
Layering is where a bank's own data holds the pattern, because the money passes through accounts it can see. In complead, formerly Sanction Scanner, transaction monitoring rules set conditions, thresholds and time windows and test transactions as they arrive through the API or in batch files; an alert opens as a case with the triggering transactions, every counterparty and the ownership chain attached. An analyst decides whether it becomes a report.
To prevent money laundering, firms run anti money laundering (AML) programs, from know your customer (KYC) checks and customer due diligence (CDD) to screening for politically exposed persons (PEPs) and filing suspicious activity reports (SARs).
What are examples of money laundering?
Laundering is a global problem, and because it is hidden its size can only be estimated. UNODC's 2011 study gave about 2.7 percent of world GDP, or US$1.6 trillion, as its best estimate of what criminals had available to launder in 2009. Of the proceeds laundered through the financial system, it found, less than 1 percent is seized and frozen. Seven schemes money launderers run:
- Cash couriers. Networks sell money laundering services to criminals and pay the cash into company accounts, as in the opening case.
- Money mules. People let their accounts receive and pass on criminal money for others.
- Hawala. Brokers move value by settling between themselves, so no money crosses the border with the transfer.
- Trade invoices. Goods over or under invoiced, or never shipped, carry value across borders as trade based money laundering (TBML).
- Black market peso exchange. Brokers buy drug dollars in the US and settle the debt in pesos through importers.
- Professional enablers. Lawyers, accountants and company formation agents set up the trusts and companies, knowing or suspecting what they hide.
- Banks with failed controls.
On 21 October 2026, Zhen was sentenced to nine years in prison and ordered to forfeit nearly US$23 million. In July 2025 the courier had pleaded guilty to three counts that match the US row of Table 1: conspiracy, laundering to conceal the source of the money, and a transaction over US$10,000 in criminally derived property, the 1957 offense.
Related terms
- Fraud vs money laundering. Where the crime that earns the money stops and its laundering starts.
- Structuring. Splitting cash so that no single deposit reaches a reporting threshold.
- Money mule. A person whose account receives and forwards criminal money.
- Anti money laundering. The laws, rules and controls that keep criminal proceeds out of the financial system.
- Trade based money laundering. Moving criminal value through false invoices and shipments.
- Financial crime. The wider family of offenses that produce or move illicit money, laundering among them.
How this entry was checked. This entry is by Minhac Celik (Marketing Advisor, complead), with Ufuk Gürdaş, Compliance Specialist, as reviewer; last reviewed 28 October 2026. On 28 October 2026 the offense was read in four texts: 18 U.S.C. 1956 and 1957, the UK Proceeds of Crime Act 2002 (sections 327 to 329, 334 and 340), Directive (EU) 2018/1673 with its 2024 amendment, and India's Prevention of Money Laundering Act 2002 (sections 2, 3 and 4 and its Schedule). The FATF Recommendations (June 2026), UNODC's 2011 study, AMLA's timeline, 31 CFR 1010.311 and 1020.320 and the Justice Department's release of 21 October 2026 supplied the rest, and the definition rests on what those laws and the FATF ask a prosecutor to prove.
